No bright spot in demand Aluminum prices may be mainly range-bound in the medium term

On the macro front, the important driver of last year's commodity rally was loose liquidity, but if Shibor is used as the market interest rate, the 1-year Shibor broke through 4 last week, and it was 4.
0407 on Monday, up more than 1
from the end of the third quarter of last year.
In the case of increasingly tight liquidity, the attributes of commodity finance will gradually fade, and supply and demand will become the dominant factor
.
At the end of last week, Fang Xinghai, vice chairman of the China Securities Regulatory Commission, mentioned that futures do not need to be inflated, reflecting management's expectation
that commodity futures will return to their roots.
In addition, although the dollar index rally was blocked at 101.
7 after mid-February and then oscillate, the overall dollar index is still in
a strong pattern.
With the French election approaching, risk aversion in the market may push the dollar higher again, and commodities will be suppressed
.
Against this backdrop, market speculative funds will tend to be cautious
.

In terms of market, the main downstream markets of aluminum are real estate, infrastructure, automobiles and home appliances
.
In the fourth quarter of last year, various parts of the country successively introduced real estate control measures, and the turning point of real estate sales has appeared
.
The high correlation between home appliances and real estate prosperity will also be dragged down
.
Infrastructure projects are constrained by tight local finances and are unlikely to grow as rapidly as in 2009, and the implementation rate of PPP projects in infrastructure construction is not high
.
Last year's automobile production and sales data increased sharply due to the state subsidy policy, but this is not sustainable, and the January production data fell both month-on-month and
year-on-year.
If there is no more expansion of aluminum in the new application field, the growth of aluminum demand this year is doubtful
.

In terms of output, in November 2015, major domestic aluminum companies reached an agreement to reduce production, which kicked off the prelude to the supply-side reform of non-ferrous metals, but since the second half of last year, domestic aluminum enterprises have actively resumed production, coupled with the release of new production capacity, domestic aluminum production has once again entered a stage
of rapid growth.
Aluminum production reached 2.
8 million tons and 2.
89 million tons in November and December last year, respectively, continuing to hit record highs
.
According to SMM statistics, the output will exceed 3 million tons
in January this year.

In terms of inventory, due to spot discounts, the inventory of the previous period continued to increase, as of February 24, it was more than 190,000 tons, an increase of about 90,000 tons from the end of last year, and futures warehouse receipts increased by more than 100,000 tons
in the same period.
While total LME aluminium inventories were down slightly from the end of last year, its Asian inventories increased by more than 130,000 tonnes
.

Based on the above analysis, in the context of the fading nature of commodity finance, the fundamentals of aluminum itself are not enough to support the continuous rise
in prices.
Overall, aluminum prices are still in the range-bound stage and are currently at a relatively high level, and the pullback is reasonable
.